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Earlier this year, we wrote about how after several quiet months of recovery from the dual industry crises beginning in March, A&D work has begun in earnest. Since that time, there’s been major mergers and acquisitions that have reverberated through the industry. The lesson behind these deals is that A&D season is no longer coming; it’s here.
These deals have signified a return to a more aggressive approach to deal-making than what we’re used to seeing lately in the Western Canadian Sedimentary Basin. In this type of environment, it’s not enough to limit your A&D pursuits to publicly available opportunities. Due to the incredible pressures heaped upon producers, many companies have struggled throughout 2020 and will either look to merge or divest or will be forced to by their lenders. As a result, producers looking to expand their operations and balance sheets will find it makes more sense to do so via acquisition rather than drilling.
The issue is that a lot of acquisition or merger opportunities may never become publicly available. Those forced to divest might not be actively looking to do so until an offer is thrust upon them. Those looking to acquire in this challenging environment need to be proactive in their A&D scoping.
This more aggressive approach harkens back to a few years ago, when $30 billion in consolidation ruled the day. Back then, it was standard practice for companies to proactively search for opportunities using public data outside of a data room.
Companies with capital, or with solid financials, are starting to fill in the blanks. Where are target acquisitions focused? Who are the working interest partners, and do they also meet buyers’ criteria? What analogous plays would make sense to pursue? What are the reserves and what are the associated liabilities? Since the number of publicly traded companies has decreased over the past 5 years, the only option is typically government-collected data that can be time-consuming to correlate and evaluate to find the best opportunities available.
So, this is less a radical change in A&D philosophy and more of a return to form. Acquisition and Divestment strategy is coming full circle, which leads to the question: are your processes able to support this current environment? Do you have robust methodology to look for quality assets that may not be currently on the market?
XI Technologies has been in the A&D scoping game since the late 1990s, with tools built and perfected for strategic acquisition identification and evaluation. AssetBook is still the best source for working interest production and has evolved over time to meet the changing needs of the industry and to continue to help clients make better decisions. To get a sense of how you can use AssetBook to compete in the current, more aggressive world of A&D, click here to watch a short video.